In Starbev GP Ltd v Interbrew Central European Holding BV(1) claimant Starbev GP Ltd and defendant Interbrew Central European Holding (ICEH) BV – a Dutch subsidiary of global brewer Anheuser Busch InBev (ABI) NV/SA – sought declaratory relief from the court for various issues relating primarily to points of contractual construction arising from the sale of the latter's business to the former (for further details on this case please see also "Litigation privilege – a cautionary tale").


Starbev was one of the vehicles set up by CVC Capital Partners, a private equity firm, to acquire ICEH's European brewing business in December 2009. Starbev acquired ownership of the business indirectly through its subsidiary Starbev Holdings Sàrl (Caspian). As part of the acquisition, the parties entered into a contingent value right agreement (CVR), which gave ICEH the right to receive deferred consideration on any subsequent sale of the business.

ICEH's entitlement arose if the cash proceeds of any such subsequent sale exceeded certain thresholds, which were linked to the value of the defined term 'investment amount' in the CVR. Essentially, the higher the investment amount figure, the less deferred consideration ICEH would be entitled to under the CVR.

In April 2012 Starbev entered into a sale and purchase agreement with US brewer Molson Coors to sell the business. The sale was completed in June 2012. The consideration for this subsequent sale included both a cash payment and a non-transferable note redeemable after December 2012, deferring part of the payment. ICEH alleged that structuring the deal in this way had the effect of reducing its entitlement under the CVR.


The extent to which ICEH was entitled to a share of the proceeds from the subsequent sale formed the basis of the litigation between the parties. The key issues between the parties were as follows:

  • Should the investment amount under the CVR, as calculated by Startbev, have the transaction costs deducted from it?
  • In the alternative, was ICEH estopped by acquiescence from denying Starbev's figure?
  • Did the note fall within the anti-avoidance provisions in the CVR?(2)

Definition of 'investment amount'
In the CVR, 'investment amount' was defined as "the aggregate Cash investment in Starbev Interests made by the [CVC funds] and applied by Starbev in acquiring [interests in Caspian] at the SPA [sale and purchase agreement] Completion".

At issue was whether the acquisition costs paid by Starbev in acquiring interests in Caspian could be said to fall within that definition – that is, whether they had been "applied by Starbev in acquiring [interests in Caspian] at the SPA Completion".

Starbev argued that there was no good commercial reason to exclude the transaction costs, stating in its submissions that "no sane businessman would exclude acquisition costs in the calculation of his return on investment".

ICEH made two primary arguments against Starbev's interpretation.

Iterative test argument
ICEH argued that Starbev's argument failed the 'iterative test' outlined in Rainy Sky SA v Kookmin Bank.(3) In Rainy Sky the court remarked that resolving an issue of interpretation was "an iterative process, involving checking each of the rival meanings against other provisions of the document and investigating its commercial consequences".

Applying that test to the CVR, ICEH made two main points:

  • Starbev's interpretation was inconsistent with a section of the CVR which required that Caspian (not Starbev) provide ABI with details of the investment amount. As Caspian would not know what expenditure Starbev had incurred in making that investment, it would be inconsistent to read 'investment amount' as including transaction costs.
  • The CVR expressly specified only that Caspian's (not Starbev's) annual report and accounts should be provided to ABI, which would also not show transaction costs incurred by Starbev on its own account.

Justice Blair dismissed ICEH's arguments and found for Starbev on this issue. He held that:

  • Caspian could provide details of the transaction costs because it was owned by Starbev, which was contractually required to procure that Caspian provide the investment amount details to ABI; and
  • Caspian's obligation to provide its accounts occurred annually and the reasonable inference was that this was to enable ABI to see how the business was developing. It did not follow that this requirement had any bearing on the meaning of 'investment amount'.

Redundancy argument
ICEH contended that the words "applied by Startbev in acquiring [interests in Caspian]" would be redundant if it had been intended that all the cash put into the transaction was to be included within the definition of 'investment amount'. 'Investment amount' could have been defined as "the entirety of the funds received from CVC", but the parties had elected not to do so. Starbev disagreed, arguing that this wording would exclude, for example, sums applied by Starbev in acquiring other assets. The judge agreed with Starbev.

Having rejected both ICEH's iterative test and redundancy arguments, the judge found that Starbev's interpretation was consistent with the language of the CVR and that there was no commercial reason for a contrary interpretation as the transaction costs were just as much "applied... in acquiring" interests in Caspian as the purchase consideration.

Estoppel by acquiescence
Having found for Strabev on the first issue, nothing turned on Starbev's alternative case that ICEH be estopped from disputing the investment amount. However, the judge nevertheless considered the point in obiter comments.

Starbev argued that as ICEH had not challenged the investment amount figure until after the subsequent sale to Molson Coors, it should be estopped from disputing the figure. ICEH, acting responsibly, should have taken steps to make its disagreement with the figure known much earlier than it had. ICEH denied that it had behaved irresponsibly, arguing that there was no reason to challenge the investment amount until it looked as though there might be a payment due under the CVR.

It was common ground that the legal principles underpinning estoppel by acquiescence were those articulated in ING Bank NV v Ros Roca SA.(4) Essentially, the court had to consider two questions:

  • Was there a relevant assumption of fact or law made by Starbev, and was this "acquiesced in" by ICEH?
  • If so, would it be unconscionable to allow ICEH to go back on the assumption?

Both parties agreed that silence could amount only to acquiescence, in the context of estoppel by acquiescence, where there was a 'duty to speak'. Starbev argued that such a duty had arisen, citing Ros Roca, which stated that a duty to speak could arise if a reasonable person would expect the other party, "acting honestly and responsibly", if it had a claim, to take steps to make that claim known.

On Starbev's case this requirement meant that (what it characterised as) irresponsible behaviour on the part of ICEH could amount to acquiescence. The judge disagreed, holding that impropriety of some description was required and irresponsibility alone was insufficient.

ICEH also advanced an argument that acquiescence by estoppel should apply only to cases where the party to be estopped knows the party raising the estoppel to be mistaken. ICEH drew a distinction between this and the facts of the instant case where the parties simply disagreed over the investment amount figure, without necessarily knowing which party was correct. However, the judge disagreed with ICEH's distinction, holding that the relevant mistake was whether there was a dispute as to the amount (rather than the amount itself).

The judge concluded that no estoppel could arise principally, in addition to the acquiescence points above, because:

  • Starbev knew that there was always a risk that the investment amount might be challenged by ICEH, at least until the figure had been verified and reported on by independent accountants; and
  • it was not unconscionable behaviour on the part of ICEH not to communicate its doubts about the investment amount figure to Starbev and to wait until after the subsequent sale before verifying the investment amount in accordance with the CVR.

Anti-avoidance issue
The court considered whether the note issued as part of the subsequent sale (as part payment of the price for the purchase of the business) fell with the anti-avoidance provision in the CVR. The provision covered "any… transaction that… results in payments to… [CVC or Starbev], with the purpose of reducing payments due to ABI".

Starbev made two primary arguments as to why the note did not fall within the provision.

Transaction argument
Starbev argued that the note was not a 'transaction' but consideration for the subsequent sale. ICEH disagreed, submitting that the note was both:

  • a transaction in its own right, giving rise to contractual obligations between the parties (as set out in the terms of the note); and
  • part of a wider transaction that was structured so as to reduce payments to ICEH.

The judge agreed with ICEH. The note was consideration for the subsequent sale, but this did not preclude it from being a 'transaction', which a note of its kind was.

Purpose argument
Starbev argued that 'the purpose' of the transaction should be construed narrowly to mean the sole purpose. As a matter of construction, the phrase 'the purpose' – using the definite article – limited the number of purposes to one. On this interpretation, the provision would apply only to "artificial transactions with no commercial purpose". This was not the case here, as:

  • both parties to the transaction had been dealing at arm's length; and
  • there were valid commercial reasons for structuring the transaction in the manner that it had been (eg, it exposed Starbev to the potential of a significant upside in the purchaser's share price).

ICEH contended that 'purpose' in this context meant any of a number of purposes. In other words, as long as one of Starbev's purposes was to reduce payments to ABI due under the CVR, this would be sufficient to trigger the provision.

ICEH also advanced an alternative argument that 'purpose' in this context referred to the dominant purpose – that is, that the alternative commercial justifications for the note were subordinate to its main purpose of reducing payments to ABI.

In his judgment, the judge cited Hayes v Willoughby,(5) where the Supreme Court considered the meaning of the term 'the purpose' in the Protection from Harassment Act 1997. The judge considered this case as authority for the proposition that "the ordinary principle is that the relevant purpose is the dominant one".

Applying this principle, the judge concluded that while there were legitimate commercial purposes for structuring the transaction in the manner that it had been, on the facts, these purposes were subsidiary to the dominant purpose of reducing the payments which would otherwise have been due to ABI.

Having rejected Starbev's transaction and purpose arguments, the judge found for ICEH on this issue, holding that the note did fall within the anti-avoidance provision in the CVR.


This case is interesting in several respects:

  • It provides a useful illustration of the modern leading authority on contractual construction, Rainy Sky, being applied.
  • It clarifies the relevant threshold for estoppel by acquiescence. A party knowing that the other party to a contract is acting on an incorrect assumption must act with impropriety in not correcting this mistake for the estoppel to arise. However, in order to guard the uncertainty as to what might constitute 'impropriety' in particular situations, parties would be well advised to state explicitly the circumstances under which a duty to speak will arise.
  • It provides guidance on the correct contractual interpretation of 'the purpose'. However, rather than relying on the general principle, it is far better to state explicitly when drafting contracts what is precisely meant by the term.

For further information on this topic please contact Chris Whitehouse or Simon Hart at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email ( or The RPC website can be accessed at


(1) [2014] EWHC 1311 (Comm).

(2) There was a further issue about the effect of the anti-avoidance provisions as on the various thresholds in the CVR. This final issue is not covered in this update.

(3) [2011] UKSC 50; for further details please see "Common sense counts when construing commercial contracts".

(4) [2012] 1 WLR 472.

(5) [2013] 1 WLR 935.